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Accountability of Non-Government Organization from the Perspective of Stakeholder Theory

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Accountability of Non-Government Organization from the Perspective of Stakeholder Theory International Journal of Accounting and Taxation December 2016, Vol. 4, No. 2, pp. 98-119 ISSN: 2372-4978 (Print), 2372-4986 (Online) Copyright © The Author(s). All Rights Reserved. Published by American Research Institute for Policy Development DOI: 10.15640/ijat.v4n2a7 URL: https://doi.org/10.15640/ijat.v4n2a7 Accountability of Non-Government Organization from the Perspective of Stakeholder Theory Anik Yuesti1, Luh Gde Novitasari2 & Ni Wayan Rustiarini3 Abstract This study aims to see the accountability of non-government organization from the perspective of Stakeholder theory. Accountability in its practice and theory has weaknesses. The weaknesses are lacking of supervision of disbursement and neglecting people’s culture (Dixon et al., 2006); lacking of information in organization (Kovach et al., 2003); financial statements that are submitted only to the donors (Goddard and Assad, 2006); and the many scandals and abuses of power in organizations (Gibelman and Gelman, 2001). However, this agency theory cannot be applied by NGOs because they are social organizations (Dixon, et al., 2006). Therefore, it is interesting to know the practices and the accountability of NGO. The researcher used interpretive existential phenomenology method to understand a phenomenon (Burrel dan Morgan, 1994; pp.243-247). Stakeholder theory is used to analyze problems with MBM organization activity assumption, which is related to the donors and community. The results of the research show that accountability based on stakeholder perspective theory is for all stakeholders. They are the owners, the management, and social. Stakeholder theory does not emphasize on vertical relationship or the relationship with God as the Owner. Keywords: Accountability, stakeholder theory 1 Postgraduate program Mahasaraswati Denpasar University Magister Manajemen Indonesia [email protected] 2 Faculty of Economy Mahasaraswati Denpasar University Accounting Study Program Indonesia [email protected] 3 Faculty of Economy Mahasaraswati Denpasar University Accounting Study Program Indonesia [email protected] Yuesti, Novitasari & Rustiarini 99 I. Introduction Various criticisms in articles and media highlighting the accountability of non- governmental organization (NGO) are getting more intensified in respect to disbursement issues (Gibelman and Gelman, 2001; Goddard and Assad, 2006; Ebrahim, 2003; Brown and Moore, 2001; Kovach et al., 2003; Dixon et al., 2006; Gray et al., 2006; Unerman and O'Dwyer, 2006 a, b; Kaldor, 2003), more specifically to the rights and obligations of the organization (Lehman, 1999, 2005). The issues arise because the purpose of NGOs to help the community (the stakeholder) solve their problems seems to be weak in terms of its accountability (Fries, 2003; Brown dan Moore, 2001). “How should the accountability of NGOs be?” is still a difficult question to answer and still in debates (Ebrahim, 2003; Gray et al., 2006). Weak accountability of NGOs can be seen from, for example, financial reports that are mostly submitted only to the donors (Ebrahim, 2003; Goddard and Assad, 2006), lacking of information about organization’s activities to the community (Kovach et al., 2003), and lacking of supervision of the disbursement that disregards the culture of community (Dixon et al., 2006). This happened apparently due to many scandals and abuses of power done by the NGOs (Gibelman and Gibelman, 2001). Kovach et al. (2003) analyzed the accountability in three forms of organization, which are IGO (international governmental organization), TNC (transactional corporation), and NGO (non-governmental organization). His studies measured the accountability of organizations by using two approaches, namely the number of members and access to information. His study found that the members of the IGO has an insignificant role in policy making because there are only a few members involved in it while in the TNC the decision is made by the shareholders, and in the NGO decision is made by the members and the parties outside organization. Based on the measurement of access to information, the IGO organization is more transparent than the two other organizations. The information presented by IGO is related to the activities performed and all IGO organizations publish an annual report. In TNC, information presentation of policies and organization's operations are very minimal, except for the information about products. 100 International Journal of Accounting and Taxation, Vol. 4(2), December 2016 Terakhir, The last, NGO presents the most minimal information of the three forms of organization. NGOs present insufficient information about their activities. On-line information presented by NGOs about policy and decision making is mostly not transparent, and not all NGOs publish annual reports. From these results it can be concluded that the weak accountability of NGOs to stakeholders is caused by poor corporate governance (Gibelman and Gelman, 2001) and by leaning on the viewpoint of agency theory, not on the stakeholder theory because the reports are mostly submitted only to the donors. Factually, the responsibility of the NGOs is more to the stakeholder theory because NGO is a social organization (Brown and Moore, 2001; Ebrahim, 2003; Gray et al., 1997; Unerman and O'Dwyer, 2006a; O'Dwyer, 2005; Ibrahim 2007). Based on agency theory (Jensen and Meckling, 1976) company is the media run by agent that is hired by principal to maximize profits. Different from stakeholder theory, agent hired by principal does not only have to be accountable to the principal (donor), but also to the communities that are involved (Atack, 1999; Kovach et al., 2003; Power, 1991; Goddard, 2004). This opinion is based on the desire of donors to maximize the welfare of the community through an agent, and the fact that organization and community have various forms of both beneficial and disadvantageous relationships that influence each other. This makes community has an important position with which it can claim against organization (Unerman and O'Dwyer, 2006; Driscoll and Stairk, 2004). Agency theory and stakeholder theory derived from philosophical hedonism (Aristippos and Epikuros) and eudemonisme (Aris¬toteles) who is then proposed his deontology and neoclassical views. According to Aristippos "the thing that is truly good for human is pleasure", and having almost the view, Aristotle stated "the highest goal and the final meaningful thing of human life is happiness (eudaimonia) which can be achieved by carrying out its functions properly" (Bertens, 2007, pp. 235). Furthermore, the idea of stakeholder theory is based on the moral philosophy of deontology that involves various parties as part of economic activities and all participants bear all aspects of activities together making them collectively referred to as stakeholders (managers, employees, shareholders, creditors, customers, government, and society). All participants are contributors in creating added values resulting from the shared activities. Yuesti, Novitasari & Rustiarini 101 In contrast to the agency theory, this theory is based on neoclassical moral philosophy that views the owner (proprietor) as the center of attention. Creditors, government, and the party or other entities are regarded as outer owners causing all the funds used by those parties (for example salaries, interests, and taxes) will be considered costs instead of profit sharing (Suwardjono, 2005; pp.501-502). Regarding the facts stated above, the researcher is interested in analyzing the accountability of an NGO in Bali, Maha Bhoga Marga (MBM), based on stakeholder theory. As an NGO, the executor of a plan, not only does it have to be accountable to the donors but also to another stakeholder or the community involved both formally and morally. As it is known, this organization, which has branches in almost all regions in Bali, is focusing on environment and in its activities, this organization involves the community. Maha Bhoga Marga is an NGO that has high organization values. This can be seen from its predicate as the best social institution in Indonesia in terms of community empowerment. This organization has a good relationship with government making it have a big opportunity to actively participate in the development of Indonesian people, particularly those living in Bali. The programs of this organization are annually funded by the donors. This NGO also funds its activities by itself annually. Through this research, the accountability of this institution based on stakeholder theory will be revealed. Several previous articles and studies on NGO also gave the same conclusions stating that the accountability of NGOs is weak (Dixon et al., 2006; Goddard dan Assad, 2006; Gibelman and Gelman, 2001; Kovach et al., 2003; Fries, 2003; and Brown and Moore, 2001). Based on this conclusion, the problem of this study is “How is the form and accountability of NGOs seen from the perspective of stakeholder theory?” Since the accountability of NGOs is still referring to agency theory – the reports of their activities are submitted only to their donors – theoretical implications of this study can hopefully give new understanding to explain and revise the existing theory about the accountability concepts of NGOs to the donors and the community, which is based on stakeholder theory. Different from the approach of agency theory, the reports about the organization’s activities are not only submitted to the donors but also to the people involved. 102 International Journal of
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